For a short-term savings strategy (anywhere from 1 month to 3 years), there are a number of savings account types you should consider. The advantage of these accounts is that they’re generally low to no risk. The disadvantage is that they don’t pay that much interest. But for service members just looking for a good low-risk place to start saving money, any one of the following four methods will do the trick.
- Lowest interest rates of all methods.
- Highly liquid—you can withdraw funds whenever you want.
- Typically insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 for each account.
Money Market Accounts
- Usually higher interest than savings accounts.
- Highly liquid—you can withdraw funds whenever needed and can even write checks in some instances.
- Sometimes requires a minimum balance to earn interest.
- May have a limit on the number of monthly withdrawals allowed.
Certificates of Deposit (CDs)
- Generally higher interest than savings and money market accounts.
- Money has to remain in the CD for a specified period—anywhere from 30 days to 10 years. Early withdrawals may incur penalties.
- Typically FDIC insured, but not always.
Savings Deposit Program (SDP)
- A DoD Savings Program available to service members deployed in designated combat zones.
- The highest-earning of the previous accounts at 10 percent interest annually.
- Up to $10,000 may be deposited during each deployment.
- Stops paying interest 90 days after returning home.
- Emergency withdrawals may be made when authorized by the member’s commanding officer.
- Visit the (Defense Finance and Accounting Service website) for more information.
- Now that you know your basic savings options, take some time to do your own investigating and see which
- makes the most sense for you. If you’ve already got a healthy savings going and are ready to start taking more risks with some of your money, check out the section on Investing.